Billionaire Warren Buffett tossed lifelines to a handful of blue-chip companies during the financial crisis. Five years later the payoff on those deals is becoming clear: $10 billion and counting.

Mr. Buffett approached that figure after he collected another hefty payment last week, bringing to nearly 40% the pretax income on his crisis-era investments, according to a Wall Street Journal analysis.

The bounty is a vivid illustration of one of Mr. Buffett's favorite investing maxims: "Be fearful when others are greedy, and be greedy when others are fearful."

Billionaire Warren Buffett tossed lifelines to a handful of blue-chip companies during the financial crisis. Five years later, the payoff on those deals is becoming clear: $10 billion and counting. Anupreeta Das reports. Photo: Getty Images.

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The latest windfall for the Omaha, Neb., billionaire and his conglomerate, Berkshire Hathaway Inc., came when candy maker Mars Inc. repaid $4.4 billion that its subsidiary, Wrigley, borrowed in 2008. That payment alone is expected to net Berkshire a profit of at least $680 million.

"In terms of simple profitability, an average investor could have done just as well investing in the stock market if they bought during the panic period," Mr. Buffett said in an interview Saturday. He was referring to a monthslong stretch beginning in the fall of 2008 when the stocks of some of his favorite companies, including Wells FargoWFC-0.48% & Co. and American Express Co.AXP-0.08%, fell to historic lows. "You make your best buys when people are overwhelmingly fearful."

But few investors, if any, capitalized on the crisis as expertly.

By comparison, the U.S. government invested about $420 billion through its Troubled Asset Relief Program. The government also demanded beneficial terms and collected sizable dividend payments for a return of about $50 billion, or 12%, thus far, according to the U.S. Treasury's website.

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Mr. Buffett said he hopes to use the cash to make other big investments soon that will bring equally attractive returns. Berkshire will continue to buy stocks to add to its portfolio of over $100 billion, because "it's still better to have equities than cash," he said.

But big acquisitions such as the 2010 purchase of railroad operator BNSF Railway Co. for $26 billion have gotten harder to find. As prices have risen along with the economic recovery, Mr. Buffett has publicly lamented the paucity of transformative deals that would allow Berkshire to put some of its cash to use.

Starting with Mars in April of 2008, when credit markets began to tighten in advance of the financial crisis, some big-name companies looked to Mr. Buffett—and Berkshire's huge war chest—as a lender of last resort.

In addition to much-needed capital, the companies acquired something equally valuable: Mr. Buffett's implicit endorsement of their long-term prospects. Shares of these companies generally went up after they revealed Berkshire's involvement.

In six major deals, Berkshire invested a total of about $26 billion. Mr. Buffett used Berkshire's gigantic cash hoard to move swiftly and exact lucrative terms that created a stream of payments from the borrowers.

Mr. Buffett's deal-making started in the early days of the crisis and continued deep into the recovery. The last of the deals was a 2011 loan to Bank of America Corp.BAC-1.38% for $5 billion.

Several deals are continuing to pay hefty dividends. Berkshire also owns equity stakes in the firms, or warrants to buy them, that add several billion dollars more to the company's return on investments, at least on paper.

Although the warrants on some of these deals effectively came free with Berkshire's purchase of preferred shares, accounting rules require the company to split its cost between the stock and warrants acquired. That means Berkshire records gains differently in its books than a cash-in, cash-out tally adding up to about $10 billion.

As the economy has recovered, and with credit available at more attractive rates, some of the companies have opted to redeem securities owned by Berkshire or adjust the terms in ways favorable to Mr. Buffett.

Dow Chemical, which borrowed $3 billion from Berkshire to help fund the 2009 acquisition of Rohm & Haas, has said buying back the preferred stock is a priority.

Also last week, Berkshire became one of Goldman's largest shareholders with a $2.1 billion stake after the close of a five-year deal in which Berkshire injected $5 billion into the bank.

Berkshire bought 50,000 shares of preferred stock from Goldman that required the bank to pay $500 million in annual dividends. When Goldman redeemed the shares in March 2011, it paid Berkshire an extra $500 million as a premium.

The original deal also gave Berkshire warrants to buy 43.5 million common shares for an additional $5 billion, which would have made the conglomerate Goldman's largest shareholder. In March, the bank amended the terms to give Berkshire a smaller stake without Berkshire having to spend extra dollars.

Berkshire helped Mars finance its $23 billion purchase of Wrigley. The company has sought to refinance parts of its debt since then to take advantage of lower interest rates and an improved credit rating, a spokesman said.

Berkshire contributed $6.5 billion, including $2.1 billion for preferred stock in Wrigley that pays an annual dividend. Berkshire also bought an additional $1 billion of Wrigley debt later. Thus far, the investment is expected to net Berkshire nearly $4 billion, including annual dividends and a prepayment premium since the bonds were due in 2018.

Mr. Buffett's stake in Bank of America could pay off for years. Berkshire invested $5 billion in the bank in 2011, which adds about $300 million in annual pretax income. Bank of America Chief Executive Brian Moynihan recently said he doesn't plan to buy back the preferred shares any time soon. Berkshire also has until 2021 to exercise warrants for 700 million common shares for an additional $5 billion at $7.14 a share. Based on the bank's current stock price of about $14, the warrants create a paper profit of nearly $5 billion.

@ Mike - which of his companies received bailout money? He actually loaned money to several companies during the financial crisis. Like Ford, which also did not accept bailout money, i don't buffet's companies did.

Not bitter or jealous at all - I'm just not susceptible to "fan-boy" disease. It's just that he doesn't deserve to be put on a pedestal and lionized. Where he ONCE was a savvy long-term investor, he has made money in the last decade simply through political connections (like the Russian oligarches).

Between Lance Armstrong, Steve Jobs, and Warren Buffett, we have way too many "fan-boys" running around...

not really true, more like a loan shark. He had his risks here, but calculated and minimized risks. He is ending up charging 20-30% interest, but it's not quite that simple as the increased valuation of the preferred stock is included in his fees...

At the time he made those investments, I had cash to invest, but remind me, was he a backstop bid? Where those same terms offered to the public. The answer is simply, no. It was highway robbery, performed by a kleptocrat. The man is a snake in sheep's clothes.

I'm actually an unbridled, free market capitalist who just doesn't believe in government connections. You suggest I'm an angry Occupy Wall Streeter when actually I'm comfortably well off and work hard for my wages based on what I know not who I know. I'm sure The Oracle did that in his day, but his machine doesn't do that anymore. That is my point. No jealousy. I know. You will just respond "Alll I said was, Aw...poor baby," but we all know what you meant. Or perhaps you would like to respond with something possessing more of the realm of critical discourse.

A crony capitalist is one who uses the acess to the policy makers to eliminate competition and make risk free money extractedfrom the society through the regulatory framework imposed on it. I DON'T think Warren Buffet classifies as a crony capitalist. 1) I believe anybody with cash could have lent to those companies he lent to. I don't think he eliminated competition.2) I don't think he had any privilaged information at any point. If he has, I think you have to make a case of it and prove it.3) I don't think QE was kept in place only to benefit Buffet. If it has, then again you have a case and you have to prove that.

I wrote a note on Crony Capitalism in India, Crony Capitalism in the award of KG Basin block hydrocarbon E&P contract. It should still be available on net. So, I claim some knowledge of what crony capitalism is and how damaging it is to the society.

I don't think Warren Buffet is a crony capitalist and I also think one shouldn't be throwing titles like crony capitalist at people without a case.

Buffet was an owner of Mars (controlled by founding family) prior to purchase of Wrigley's. Mars is a private candy-pet food company. The resulting transaction left Mars still private. Us public investors had no access to this transaciton. Buffet is smart but he also has access to places the rest of us don't because of his $billions. He also props his book when he can like when he says publicly certain market sectors (incl debt), companies, etc. are cheap, he is often already there.

Yes. Buffet is a genius, but the same $26 billion into S&P index funds is now worth close $50 billion. A much better return than what the Oracle has seen. Of course, he got BAC and GS at very good prices and over the longer term, the profit should be better than the overall market, but then again only time will tell. I personally think given 10 years, Berkshire will start putting most of its cash into an S&P index fund.

Just more proof that Buffett is a genius. And yet the repub ankle biters, most of whom have never accomplished anything in their lives, constantly criticize him because he has endorsed most of President Obama's economic policies.

Hey cons, just because you are too dumb to understand them, doesn't mean that they are wrong...

Mr. Buffett is a wily, accomplished investor. He is also a "brand", having cultivated the notion that he is not a threat to the enterprise. Most of the recipients of his largesse would not have accepted it from more traditional sources. Try to imagine Goldy taking $5 billion from Pershing Square. That is his core strength. In the macho world of high finance, his is the velvet hammer. Despite protestations to the contrary, American exceptionalism is alive and well in flyover country. I'm envious.

All done at the expense of other shareholders, with the explicit knowledge, since publicly admitted, that he was in direct conversation with then Secretary Treasurer Hank Paulson, and not only aware that the government was on the cusp of intervening with massive financial intervention, but actually guiding the form that that intervention should take. What a fraud this man's public persona is. Crony capitalism run amuck is a kleptocracy. Mr. Buffett is no more than our very own kleptocrat in chief.

Warren Buffett has an ear to the ground. It wasn't done at the expense of the shareholders, he IS a shareholder. What part of investing and finance do you not understand. The banks were having a lot of trouble during that time. Obama was busy bailing out the banks, his cronies at GM, his cronies at the UAW and other unions, and the ones on Wall Street.

Who else with that kind of cash would be willing to take a huge risk? What if Buffett had refused to assist these companies? This bailout is much different that Obama bailing out his cronies. Obama, your messiah, used tax money. Our money which we will likely never see again. This was more of a give away or entitlement rather than a bailout. Buffett used his own personal wealth, not your money nor mine.

Hindsight is 20/20. People were fearful when BoA fell from $50 to $25 in 6mo from Jan `08 to Jul `08, so was that the time to buy? Or was the real fear when it fell further to $15 in Nov `08? Neither it seems. I say that the time to buy BAC was 3 months into `09 at $3 -- Yes, Hindsight is 20/20...

Socialism for the few has been a successful program... for the few. Mr. Buffet's son can attest to that. Despite these billions, he's collected 100's of thousands in farm subsidies over the last decade.

I would just love to see Buffet and his world wide programmed fellow murdering population control people [Winfrey, Rockefeller, Gates, Turner, Bloomberg, Soros ..) all go broke and live under a bridge. I cannot think of a more demented bunch of billionaires that use their money to force sterilize/abort the worlds population.

These three baldies have made a ton of money for this guy. The rest of the main street can go and fend for themselves. Or better still: feed at the trough that is the White House where Buffett's man, the Panderer-in-Chief, Showbama resides.

Why should he? Smart folk work for themselves not the government. I admire Buffett's two faced PR campaign. He fooled my sister I wouldn't even try to tell her the trick. Read the 48 Law of Power and learn.

The "Sage of Omaha", if he were headquartered in NYC, would be pilloried by the media as a "greedy financier". Berkshire Hathaway is simply a holding company, and Buffet is simply an investor......albeit a very skilled investor. The wealth he creates for his shareholders is actually generated by his operating companies and by his timely investments in other peoples operating companies.

To the Occupy Wall Streeters, Buffet is a parasite feasting on the labors of others.

jealous much? His companies are some of the best run/greatest customer service in the world. He is a billionaire because he invests in good companies and got a $100,000 sum to invest over 30 years ago.

Not jealous at all, just pointing out the sick, disgusting hypocrisy of the Left here. You all said many of the same things about Mitt Romney. Buffet is a perfect example of the rich getting richer while the poor are getting poorer, which has happened more under 0bama than under his predecessor.

Kudos to Mr. Buffet for buying low and selling high. But this is also a great economic lesson for liberals. You cannot tax and soak the rich. In a horrible economy where everyone else was suffering, it provided a great opportunity for those with money to make money.

The fact is under Capitalism the rich are always going to get richer, it is just whether or not you keep taxes low for everybody so the rest of us can ride along.

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